Ontario Implements Non-Resident Speculation Tax

On April 21, the Ontario government announced that a 15% foreign buyer tax, otherwise known as the Non-Resident Speculation Tax (NRST), would be imposed on foreign buyers of residential homes in Southern Ontario. Here are the basic details of this tax.


Who is included?


Almost every foreign national - a person who is not a Canadian citizen or permanent resident - is included. This includes international students and workers, visitors, and non-status persons. This applies irrespective of whether the foreign national resides in Ontario and whether they have made an application for permanent residence that has yet to be determined. The only exceptions are the following:

  1. If they have received a nomination certificate under the Ontario Nominee Immigrant Program and the property is used as their principal residence.

  2. If they are recognized refugees or protected persons. This does not include who are still in the process of making a claim that has not yet been decided.

  3. If they have purchased the residential property together with a spouse who falls under the above two categories, a Canadian citizen, or permanent resident. It should be noted that the definition of a spouse for this tax is different from the definition of a spouse under immigration laws. The definition of spouses for the purposes of this tax is:

  • Married couples;

  • Couples who have resided together for over 3 years; or

  • Couples who have a child and are in permanent relationships.

This tax is also applicable to private corporations that are held wholly or in part by foreign nationals and foreign corporations. Trusts that are held for the benefit of foreign nationals are also taxable.


Rebates


Foreign nationals are able to obtain a rebate of the entire tax amount if they fall under one of the following categories:


  1. They obtain permanent residence or Canadian citizenship within four years of purchasing the property.

  2. They have been enrolled for at least two years of study in an approved post-secondary institution in Ontario after the purchase of the property.

  3. They work legally for one year in Ontario after the purchase of the property.

How much is this tax?


The tax is 15% to be taxed on the entire purchase price of the residential property, as long as the affected person or entity holds a portion of the property.


Which area is affected?


All residential properties within the Greater Golden Horseshoe (GGH) area (see map).


What kind of properties are affected?


All properties that contain up to 6 single family residences. Purchases that are commercial, agricultural, industrial, and multi-residential apartment buildings of over 6 units are not included.


When was this tax effective?


This tax became effective as of April 21, 2017. Binding Agreements of Purchase and Sale signed before this date are not subject to this tax.


How will this tax be paid?


The tax is currently not payable electronically on closing as is the case with both the provincial land transfer tax and the Toronto municipal land transfer tax, and the NRST must be paid by certified cheque to the office of the Ministry of Finance in Oshawa prior to closing. Given that the NRST is applicable to all properties within the GHH, logistical complications for the payment procedure noted above may begin to surface in the coming months.


This tax may or may not affect Ontario’s rising housing prices. However, unlike what the name suggests, it is clear that many residents of Ontario will be directly affected by this tax when they purchase their homes. It is vital that buyers and service providers understand the complexities of this tax and whether and how they might fall under the exemptions or qualify for the rebates of this tax.


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